The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between AGG and EMB? And which fund is better?
The expense ratio of AGG is 0.35 percentage points lower than EMB’s (0.04% vs. 0.39%). AGG is mostly comprised of AAA bonds and EMB has a high exposure to BBB bond. Overall, AGG has provided lower returns than EMB over the past ten years.
In this article, we’ll compare AGG vs. EMB. We’ll look at performance and portfolio growth, as well as at their holdings and fund composition. Moreover, I’ll also discuss AGG’s and EMB’s annual returns, risk metrics, and industry exposure and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||iShares J.P. Morgan USD Emerging Markets Bond ETF|
|Category||Intermediate-Term Bond||Emerging Markets Bond|
The iShares Core U.S. Aggregate Bond ETF (AGG) is a Intermediate-Term Bond fund that is issued by iShares. It currently has 88.8B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.95% with an expense ratio of 0.04%.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.
AGG’s dividend yield is 1.90% lower than that of EMB (1.95% vs. 3.85%). Also, AGG yielded on average 2.40% less per year over the past decade (4.04% vs. 6.43%). The expense ratio of AGG is 0.35 percentage points lower than EMB’s (0.04% vs. 0.39%).
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|AGG Bond Sectors||Weight|
AGG’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 68.92%, 15.38%, 11.16%, 2.92%, and 1.63%. The fund is less weighted towards Below B (0.0%), B (0.0%), and BB (0.0%) rated bonds.
|EMB Bond Sectors||Weight|
EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Treynor Ratio of 2.7 with a Standard Deviation of 3.03 and a R-squared of 99.96. Its Mean Return is 0.28 while AGG’s Sharpe Ratio is 0.9. Furthermore, the fund has a Alpha of -0.08 and a Beta of 1.01.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Treynor Ratio of 3.24 with a R-squared of 23.34 and a Alpha of 0.89. Its Mean Return is 0.44 while EMB’s Standard Deviation is 8.44. Furthermore, the fund has a Sharpe Ratio of 0.55 and a Beta of 1.36.
AGG’s Mean Return is 0.16 points lower than that of EMB and its R-squared is 76.62 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than EMB. The Alpha and Beta of AGG are 0.97 points lower and 0.35 points lower than EMB’s Alpha and Beta.
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AGG had its best year in 2019 with an annual return of 8.68%. AGG’s worst year over the past decade yielded -2.15% and occurred in 2013. In most years the iShares Core U.S. Aggregate Bond ETF provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.53%, 4.04%, and 6.04% respectively.
The year 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in AGG would have resulted in a final balance of $15,368. This is a profit of $5,368 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.04%.
With a $10,000 investment in EMB, the end total would have been $19,295. This equates to a $9,295 profit over 11 years and a compound annual growth rate (CAGR) of 6.43%.
AGG’s CAGR is 2.40 percentage points lower than that of EMB and as a result, would have yielded $3,927 less on a $10,000 investment. Thus, AGG performed worse than EMB by 2.40% annually.
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